PUBLISHED
UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT
No. 20-1074
BRIAN H. MCLANE,
Petitioner – Appellant,
v.
COMMISSIONER OF INTERNAL REVENUE,
Respondent – Appellee.
------------------------------
AMERICAN COLLEGE OF TAX COUNSEL; TAX FREEDOM INSTITUTE, INC.,
Amici Supporting Appellant.
Appeal from the United States Tax Court. (Tax Ct. No. 020317-13L)
Argued: October 29, 2021 Decided: January 25, 2022
Before MOTZ, DIAZ, and RICHARDSON, Circuit Judges.
Affirmed by published opinion. Judge Motz wrote the opinion, in which Judge Diaz and Judge Richardson joined.
ARGUED: Daniel M. Lader, DIRUZZO & COMPANY, Fort Lauderdale, Florida, for Appellant. Marion E.M. Erickson, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellee. ON BRIEF: Joseph A. DiRuzzo, III, DIRUZZO & COMPANY, Fort Lauderdale, Florida, for Appellant. David A. Hubbert, Acting Assistant Attorney General, Jacob Christensen, Tax Division, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellee. Frank Agostino, Phillip Colasanto, Andrew Lendrum, AGOSTINO & ASSOCIATES, P.C., Hackensack, New Jersey, for Amicus American College of Tax Counsel. Donald W. MacPherson, Peoria, Arizona, for Amicus Tax Freedom Institute, Inc.
2 DIANA GRIBBON MOTZ, Circuit Judge:
This case presents a single question: whether, after the Commissioner of Internal
Revenue conceded that a taxpayer owed $0 and was entitled to the removal of any lien or
levy, the United States Tax Court had jurisdiction to determine that the taxpayer overpaid
and order a refund. The Tax Court held that it did not. We agree and so affirm.
I.
When the Internal Revenue Service (“IRS”) determines that a taxpayer owes more
than reported in that year’s tax return, it may inform the taxpayer of the discrepancy in a
“notice of deficiency.” 26 U.S.C. § 6212. The taxpayer may petition for review — asking
the Tax Court to redetermine the amount of the deficiency — within 90 days from the time
the IRS mails the notice. Id. § 6213(a). In the proceeding that follows this timely petition
for review, if the Tax Court finds that there is no deficiency and the taxpayer instead
overpaid, it may “determine the amount of such overpayment” and order a refund to the
taxpayer. Id. § 6512(b)(1).
If for any reason — including failure to receive the IRS’s notice of deficiency —
the taxpayer does not timely file a petition for review, the IRS may place a lien on the
taxpayer’s property or levy the property to satisfy the amount owed. Id. §§ 6321, 6331 et
seq. But the IRS can only do this after it notifies the taxpayer of its intent to do so and of
the taxpayer’s right to seek a pre-collection hearing in accordance with §§ 6320(a) and
6330(a) of the Internal Revenue Code (the “Code”). These statutes provide a second path
to the Tax Court. After receiving notice of a lien or levy, the taxpayer may request a
collection due process (“CDP”) hearing before the IRS Independent Office of Appeals
3 (“Appeals Office”) and may thereafter petition the Tax Court for review of the Appeals
Office’s determination. Id. §§ 6320, 6330(b)(1)–(d)(1).
The taxpayer here, Brian McLane, filed a return for the year 2008 claiming
deductions for business losses. The IRS denied “almost all of” those deductions and
determined that he had underreported his liability by $23,615. The IRS mailed McLane a
notice of deficiency advising him of the discrepancy, but the parties agree that he never
received that notice. See Appellee’s Br. at 9–10. When McLane did not attempt to pay or
otherwise respond to that initial notice, the Commissioner informed him in a second notice
that the IRS sought to collect the amount of the deficiency through a lien on his property.
McLane then requested a CDP hearing under § 6330. During those proceedings,
McLane presented enough information to substantiate the losses reported in his return.
Based on the new evidence, the Commissioner conceded that McLane was entitled to
deductions exceeding those he initially claimed and concluded that he owed the IRS $0.
In February 2018, after the Commissioner removed the assessment of liability,
McLane asserted for the first time, in a telephone call with the Tax Court, that he overpaid
his taxes for the year 2008 and now sought a refund. The Tax Court held that it lacked
jurisdiction to determine and order a refund of overpayment and thus dismissed McLane’s
case. McLane then timely noted this appeal.
II.
We review Tax Court decisions “in the same manner and to the same extent as
decisions of the district courts in civil actions tried without a jury.” 26 U.S.C. § 7482(a)(1);
see also Iames v. Comm’r, 850 F.3d 160, 163 (4th Cir. 2017). Thus, we review
4 jurisdictional determinations de novo. See Nauflett v. Comm’r, 892 F.3d 649, 651 (4th Cir.
2018). Because the Tax Court, as an Article I court, may exercise only jurisdiction
authorized by statute, “[t]he question of Tax Court jurisdiction is one of statutory
interpretation.” Borenstein v. Comm’r, 919 F.3d 746, 748 (2d Cir. 2019); see also Willson
v. Comm’r, 805 F.3d 316, 319–20 (D.C. Cir. 2015) (“[T]he tax court possesses only
‘limited jurisdiction,’ and may exercise it ‘only to the extent expressly authorized by
Congress.’” (internal citations omitted)).
In CDP hearings like the one at the heart of this appeal, a taxpayer may raise before
the Appeals Office “any relevant issue relating to the unpaid tax or the proposed levy.” 26
U.S.C. § 6330(c)(2)(A). Relevant issues include “appropriate spousal defenses,”
“challenges to the appropriateness of collection actions,” and “offers of collection
alternatives.” Id. § 6330(c)(2)(A)(i)–(iii).
In addition, if a taxpayer “did not receive any statutory notice of deficiency for such
tax liability or did not otherwise have an opportunity to dispute such tax liability,” the
taxpayer may raise “challenges to the existence or amount of the underlying tax liability.”
Id. § 6330(c)(2)(B) (emphasis added). A taxpayer may then appeal to the Tax Court, which
may review only the issues considered in the first instance by the Appeals Office. Id.
§ 6330(d)(1). Because McLane never received a notice of deficiency from the IRS, he falls
within this latter category. In other words, § 6330(c)(2)(B) permits him to raise in a CDP
hearing a challenge to his “underlying tax liability” for any tax period that he has not yet
had an opportunity to dispute. McLane contends that the phrase “underlying tax liability”
5 (a phrase Congress left undefined) confers jurisdiction on the Tax Court to determine that
he overpaid and order a refund. We disagree.
III.
Sections 6330 and 6320 provide a taxpayer with the right to a CDP hearing only
when the IRS seeks to enforce collection of tax liability via lien or levy. If the taxpayer
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PUBLISHED
UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT
No. 20-1074
BRIAN H. MCLANE,
Petitioner – Appellant,
v.
COMMISSIONER OF INTERNAL REVENUE,
Respondent – Appellee.
------------------------------
AMERICAN COLLEGE OF TAX COUNSEL; TAX FREEDOM INSTITUTE, INC.,
Amici Supporting Appellant.
Appeal from the United States Tax Court. (Tax Ct. No. 020317-13L)
Argued: October 29, 2021 Decided: January 25, 2022
Before MOTZ, DIAZ, and RICHARDSON, Circuit Judges.
Affirmed by published opinion. Judge Motz wrote the opinion, in which Judge Diaz and Judge Richardson joined.
ARGUED: Daniel M. Lader, DIRUZZO & COMPANY, Fort Lauderdale, Florida, for Appellant. Marion E.M. Erickson, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellee. ON BRIEF: Joseph A. DiRuzzo, III, DIRUZZO & COMPANY, Fort Lauderdale, Florida, for Appellant. David A. Hubbert, Acting Assistant Attorney General, Jacob Christensen, Tax Division, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellee. Frank Agostino, Phillip Colasanto, Andrew Lendrum, AGOSTINO & ASSOCIATES, P.C., Hackensack, New Jersey, for Amicus American College of Tax Counsel. Donald W. MacPherson, Peoria, Arizona, for Amicus Tax Freedom Institute, Inc.
2 DIANA GRIBBON MOTZ, Circuit Judge:
This case presents a single question: whether, after the Commissioner of Internal
Revenue conceded that a taxpayer owed $0 and was entitled to the removal of any lien or
levy, the United States Tax Court had jurisdiction to determine that the taxpayer overpaid
and order a refund. The Tax Court held that it did not. We agree and so affirm.
I.
When the Internal Revenue Service (“IRS”) determines that a taxpayer owes more
than reported in that year’s tax return, it may inform the taxpayer of the discrepancy in a
“notice of deficiency.” 26 U.S.C. § 6212. The taxpayer may petition for review — asking
the Tax Court to redetermine the amount of the deficiency — within 90 days from the time
the IRS mails the notice. Id. § 6213(a). In the proceeding that follows this timely petition
for review, if the Tax Court finds that there is no deficiency and the taxpayer instead
overpaid, it may “determine the amount of such overpayment” and order a refund to the
taxpayer. Id. § 6512(b)(1).
If for any reason — including failure to receive the IRS’s notice of deficiency —
the taxpayer does not timely file a petition for review, the IRS may place a lien on the
taxpayer’s property or levy the property to satisfy the amount owed. Id. §§ 6321, 6331 et
seq. But the IRS can only do this after it notifies the taxpayer of its intent to do so and of
the taxpayer’s right to seek a pre-collection hearing in accordance with §§ 6320(a) and
6330(a) of the Internal Revenue Code (the “Code”). These statutes provide a second path
to the Tax Court. After receiving notice of a lien or levy, the taxpayer may request a
collection due process (“CDP”) hearing before the IRS Independent Office of Appeals
3 (“Appeals Office”) and may thereafter petition the Tax Court for review of the Appeals
Office’s determination. Id. §§ 6320, 6330(b)(1)–(d)(1).
The taxpayer here, Brian McLane, filed a return for the year 2008 claiming
deductions for business losses. The IRS denied “almost all of” those deductions and
determined that he had underreported his liability by $23,615. The IRS mailed McLane a
notice of deficiency advising him of the discrepancy, but the parties agree that he never
received that notice. See Appellee’s Br. at 9–10. When McLane did not attempt to pay or
otherwise respond to that initial notice, the Commissioner informed him in a second notice
that the IRS sought to collect the amount of the deficiency through a lien on his property.
McLane then requested a CDP hearing under § 6330. During those proceedings,
McLane presented enough information to substantiate the losses reported in his return.
Based on the new evidence, the Commissioner conceded that McLane was entitled to
deductions exceeding those he initially claimed and concluded that he owed the IRS $0.
In February 2018, after the Commissioner removed the assessment of liability,
McLane asserted for the first time, in a telephone call with the Tax Court, that he overpaid
his taxes for the year 2008 and now sought a refund. The Tax Court held that it lacked
jurisdiction to determine and order a refund of overpayment and thus dismissed McLane’s
case. McLane then timely noted this appeal.
II.
We review Tax Court decisions “in the same manner and to the same extent as
decisions of the district courts in civil actions tried without a jury.” 26 U.S.C. § 7482(a)(1);
see also Iames v. Comm’r, 850 F.3d 160, 163 (4th Cir. 2017). Thus, we review
4 jurisdictional determinations de novo. See Nauflett v. Comm’r, 892 F.3d 649, 651 (4th Cir.
2018). Because the Tax Court, as an Article I court, may exercise only jurisdiction
authorized by statute, “[t]he question of Tax Court jurisdiction is one of statutory
interpretation.” Borenstein v. Comm’r, 919 F.3d 746, 748 (2d Cir. 2019); see also Willson
v. Comm’r, 805 F.3d 316, 319–20 (D.C. Cir. 2015) (“[T]he tax court possesses only
‘limited jurisdiction,’ and may exercise it ‘only to the extent expressly authorized by
Congress.’” (internal citations omitted)).
In CDP hearings like the one at the heart of this appeal, a taxpayer may raise before
the Appeals Office “any relevant issue relating to the unpaid tax or the proposed levy.” 26
U.S.C. § 6330(c)(2)(A). Relevant issues include “appropriate spousal defenses,”
“challenges to the appropriateness of collection actions,” and “offers of collection
alternatives.” Id. § 6330(c)(2)(A)(i)–(iii).
In addition, if a taxpayer “did not receive any statutory notice of deficiency for such
tax liability or did not otherwise have an opportunity to dispute such tax liability,” the
taxpayer may raise “challenges to the existence or amount of the underlying tax liability.”
Id. § 6330(c)(2)(B) (emphasis added). A taxpayer may then appeal to the Tax Court, which
may review only the issues considered in the first instance by the Appeals Office. Id.
§ 6330(d)(1). Because McLane never received a notice of deficiency from the IRS, he falls
within this latter category. In other words, § 6330(c)(2)(B) permits him to raise in a CDP
hearing a challenge to his “underlying tax liability” for any tax period that he has not yet
had an opportunity to dispute. McLane contends that the phrase “underlying tax liability”
5 (a phrase Congress left undefined) confers jurisdiction on the Tax Court to determine that
he overpaid and order a refund. We disagree.
III.
Sections 6330 and 6320 provide a taxpayer with the right to a CDP hearing only
when the IRS seeks to enforce collection of tax liability via lien or levy. If the taxpayer
requests a CDP hearing, the Appeals Office determines in the first instance whether the
IRS’s collection action may go forward. When as here, the Commissioner has already
conceded that a taxpayer has no tax liability and that the lien should be removed, any appeal
to the Tax Court of the Appeals Office’s determination as to the collection action is moot.
No collection action remains, for which there is underlying tax liability, to appeal. See
Willson, 805 F.3d at 320–21 (“As for Willson’s ‘underlying tax liability,’ there is none.
The IRS has entirely abated the 2006 liability it improperly assessed, returned the
$2,206.55 it collected in satisfaction of that improper liability and abandoned its levy.”).
We cannot read the phrase “underlying tax liability” in isolation, but instead must
read it in “the specific context in which that language is used.” Yates v. United States, 574
U.S. 528, 537 (2015) (quoting Robinson v. Shell Oil Co., 519 U.S. 337, 341 (1997)). Here,
the “specific context” is the IRS’s attempt to collect via lien or levy. See Montgomery v.
Comm’r, 122 T.C. 1, 12 (2004) (Laro, J., concurring) (“The relevant term, ‘underlying tax
liability’, is clear and unambiguous and is read easily to mean the tax liability underlying
the proposed levy.”). The phrase “underlying tax liability” does not provide the Tax Court
jurisdiction over independent overpayment claims when the collection action no longer
6 exists. * The Commissioner is correct that the “taxpayer was permitted to challenge the
amount of his underlying liability in the [collection due process] hearing . . . only in the
context of determining whether the collection action could proceed.” Appellee’s Br. at 15–
16 (emphasis added); see Iames, 850 F.3d at 162 (“Section 6330 provides a set of
procedural safeguards for taxpayers facing a potential levy action by the IRS . . .” (emphasis
added)). McLane no longer faces such an action.
For the foregoing reasons, the judgment of the district court is
AFFIRMED.
* In holding that the phrase “underlying tax liability” did not confer jurisdiction for it to determine an overpayment or order a refund, the Tax Court relied on its prior decision in Greene-Thapedi v. Commissioner, 126 T.C. 1 (2006). In Greene-Thapedi, the Tax Court rejected a taxpayer’s request that it determine an overpayment and order a refund under § 6330 on two bases. Id. First, it held that, because the Commissioner had already acknowledged in that case “that there [was] no unpaid liability for the determination year upon which a levy could be based,” the proposed levy was “moot,” and the taxpayer could no longer “challenge the existence or amount of her underlying tax liability in [that] proceeding.” Id. at 7–8. Second, it held that, “[m]ore fundamentally,” § 6330 never “give[s] [the Tax] Court jurisdiction to determine an overpayment or to order a refund or credit of taxes paid.” Id. at 8. Here, we believe it is unnecessary to decide the “[m]ore fundamental[]” question of whether § 6330 ever grants the Tax Court jurisdiction to determine an overpayment or to order a refund given that § 6330 so clearly cannot confer such jurisdiction when no active collection action persists. See Willson, 805 F.3d at 320 (“[I]f a case raises a question within the jurisdictional purview of the tax court, and that question is subsequently resolved, the case is moot notwithstanding the existence of other live controversies between the taxpayer and the IRS that do not fall within the tax court’s jurisdiction.”); Byers v. Comm’r, 740 F.3d 668, 679 (D.C. Cir. 2014).